I HOPE the HDB will review its policy on 5 per cent cash upfront payment for those taking bank loans.

In the current market, HDB flat sellers ask for cash above valuation, on average at least $20,000 to $30,000. A buyer who takes a bank loan has to fork out another lump sum to meet the HDB's 5 per cent rule, which for a four- or five-room flat could mean $15,000 to $20,000. Throw in renovation cost of about $15,000 to $20,000 (and this is a low estimate) and we are talking about at least $60,000 in cash outlay.

The HDB says the 5 per cent policy was introduced 'to encourage prudence'. But how does making people pay 5 per cent in cash ensure they will buy within their means? The measure of affordability should surely take into account CPF balance, regular job and so on.

My wife and I have enough in our combined CPF to pay for the flat in full if need be, yet we have to spend our savings to pay for part of it. If the principle is to ensure prudence, it is contradictory if I have to pay cash from my savings when there is a large sum in my CPF.

If the policy is meant to help curb profiteering, it penalises the majority who move for genuine reasons. People move home for various reasons.

In any case, I am perplexed why there is a difference between buyers taking bank loans and buyers taking HDB loans. Those who take bank loans are already at a disadvantage since HDB loans are below market rates. Why should one be further penalised for not qualifying for an HDB loan?

Yeo Yu Jin

This article was first published in The Straits Times on 27 June 2008.